Callaway Sees Solid Improvement, But Also Possible Challenges

Shares of Callaway Golf Co., the Carlsbad-based golf equipment maker, closed down 8 percent on April 24 after the company reported improved financial results but a so-so forecast.

Predictions of challenging market conditions, which came with the earnings news April 23, caused shares to slide 78 cents to close at $8.91. Retailers are holding large inventories and may be forced to sell products at a discount, said CEO Chip Brewer, who also said that Callaway is working against continuing bad weather in parts of the United States.

The manufacturer reported first quarter net income of $55 million on net sales of $352 million, compared with net income of $42 million on net sales of $288 million in the first quarter of 2013.

“We believe that our turnaround plan is firmly on track and that we are laying the proper foundation for a sustained recovery over the long-term,” Brewer said, though he warned that second quarter weakness could extend further into the year. Callaway said it would not change its previously announced earnings forecast, though it may come in at the low end of it.

Callaway generally sees its strongest sales in the first quarter.

And the first quarter was a time when most of America wanted to stay indoors. The most recent PerformanceTrak report from the Professional Golfers’ Association of America reported rounds played declined more than 10 percent in February in a wide swath of the East, South, Midwest and Rocky Mountain states. There was also weakness in Gulf Coast states. Rounds in California increased more than 5 percent.